Cash less Economy and Crypto Currency
What is Cash less economy:
This caption is somewhat confusing. It seems that we are going to talk about those countries having weak economies.
Actually we will focus here on concept where people avoid using hard cash for their routine payments and receipts or economic transaction.Means online payments, physical or virtual point of sale system or mobile payment applications, which are termed as cash wallets etc.
We will also discuss the role of Global monitoring agency here, which is, Financial Action Task Force (FATF).
We will discuss the cyrpto currency here . And, in the end, will conclude the suggested way to attain the need of world economy. When we talk about world economy it is for the whole world and not restricted to G-20 economies. The vital topic of global economy is a forex market where traders speculate in some selected currencies. This is decentralized market with future deals options. The actual import and export volume of global trade is not considered here. This market determines the global currency rates. It is said that approximate annual trading volume of forex market is above USD $ 360 trillion Whereas an approximate value of global annual trade of goods is only USD $ 25 trillion.
Cash less Economy:
Sweden, China, South Korea and United Kingdom are on the top list of cash less countries.Many other countries are moving towards cash less society setup, Australia and Finland are next in this list.
Now, the question arises, what is the benefit of cash less economy. Some of them are below.
1. The money remains safe from criminal activities.
2.If someone lost the plastic card, or mobile, he can immediately block his transactions by intimating to bank.
3.Ease of transfer and payment.
4.Auto payment trail to vendor and supplier, for any future reference and tax filing process.
5.Ease of monitoring of all payments for payer, payee and monitoring authorities.
6.Avoid fake currency notes.
7.More focus on inventory control and business instead of carrying cash worries.
8. More compliant way of payment.
9. There are many taxation related compliance in this system. In every taxation system cash payments exceeding certain limit is forbidden. All such payments are added back in final tax assessment.
10.Ease of payment while travelling.
11.Access to international market and benefit of getting international products and services, like hotels, airlines, branded or country specific products.
12. It curtails the volume of informal economy.An informal economy is one where the transaction can not be measured and mostly done via commodity or cash basis.
Apart from benefits, there are some risks in this cash less system.
1.Plastic card could be damaged, or mobile app does not work in time.
2.Password leak.
3.Mobile data could be hacked.
4.Fradulent virtual vendor resulting in a loss of payment.
5.There are many country specific restrictions for virtual international payment and receipt.
The cash less economy in developing countries:
It will help to develop the economy, keeping in view the above noted factors. The lesser of cash transaction volume will better to focus the country for further economic development.
Below are some steps, how a developing country can attain the cash less society benefits.
1.Mandatory use of point of sales system for all registered tax payer sellers.
2.Involve trade associations for the mandatory transformation of cash less society like:
1.Retailer association.
2.Dairy, poultry, meat, vegetable and fruits association.
3.Schools and colleges association.
4.Local transport association.
5.Petrol pump association
6. Welfare and religious institutions.
7.Cell phone merchant service provider.
8.Involve non banking companies in this process, like post office,multiple shop departmental stores.
Can we remove Auto teller Machine (ATM) from the economy?
Yes, gradually we can remove ATM from our daily life.
The most cash less countries, which we discussed earlier did not completely abolish the ATM network from their societies.
Below are important steps in this process.
1.Increase in the volume of Point of sale terminals.
2.Cash rewards, bonus point for every transaction executed via POS.
3.Virtual mobile coin transfer application for all mobile user without using internet.Normally a non banking institution can perform this service, like post office,gas stations and mutiple shop Modern trade market channel setup.
What is Financial Action Task Force (FATF)
FATF is a global monitoring institution to eliminate money laundering and terror financing from the world.It was initiated in 1989 by G7 countries. It has now 39 members countries. Member countries means these are compliant with FATF guidelines, but still there are many countries in this list where enough space exists for further development like South Africa,India, Brazil, Argentina, Greece, Italy and Russia.
Further, most of forex market trading is dominent in the member countries which effect the currency value of non member countries.
It is assumed that a mutually accepted cryptro currency would be initiated from FATF platform.
FATF guidelines defines memebers, which we discussed above, the countries which need special monitoring and finally those countries which do not co operate with FATF in the implementation of its
guidelines. Below are some further details for these two categories.
1.The list of monitored jurisdiction, which are not compliant to FATF.There are 19 countries in this list, and a process is defined for each of them to follow in order to become FATF compliant.
2.There is the list of countries falls under call for action from FATF, only North Korea and Iran are in this list.
What is Crypto Currency:
Is a digital and virtual assets designed to work as a medium of exchange instead of existing currency notes or parellel to existing medium for the time being. It is also termed as internet of value.
For the ease of our discussion, we divide crpto currency in two types, centralized and decentralized.
Centralized Crypto Currency:
A centralized crypto currency means controlled by any institution or entity, like in our existing model currency notes are controlled by central banks.
There are many centralized crypto currencies like Ripple XRP, Neo,cardano,Iota and Nem etc.
Ripple XRP, is now widely used by many banks in the world for international money transfer. The important banks in this list are Bank Of America, Credit Agricole and Sumitomo bank etc.
Real time money transfer is guaranteed through this channel.
The value of one ripple is around $0.20 now. It is also governed by the market forces of supply and demand.
There are some important aspects here to understand.
1. Ripple make the transfer of value in real time.
2. Many countries accross the world are using ripple as mean of money transfer.
3.Issue is that the supply of ripple is unlimited, then why its value is determined by market forces.
4.It is possible that speculation will give rise to value of ripple like we observe in the case of Bitcoin.
5.It seems all local currencies will be vanished in near future.
6.Ripple is solely controlled by its own Ripple Company.
7.Though, it is said that Ripple company started business by specific number of pre mined ripple units, which can not be mined by any other user as in the case of bitcoin. But, the initial value was assumed and now it is valued at market forces.
8. The concept of ripple is just similar to Paypal, Western Union etc. Here, instead of pair two currencies, ripple have one constant market value of Ripple XRP against any currency.
9. Ripple is of no use for making domestic payments today.
10.The value of ripple is imaginary. There is no underlying backup commodity support like gold and general acceptability.
11.If ripple collapes, it is assumed due to global recession.
12.But ripple can also be collapsed by any other reason like, new arrival of better alternate virtual currency. Speculation etc.
Decentralized Crypto Currency:
A decentralized crypto currency is one which is govern by the system P2P protocol, without any centralized monitoring authority. Most of the block chain technology is based on this theory.Bitcoin is a form of product under decentralized crypto currency. There are many countries which officially declared bitcoin as illegal due to thread to their economy, among these two are FATF memebers countries like Denmark and India.
Bitcoin is also not considered as financial instrument under US GAAP nor it is considered a risk free investment.
Bitcoin future option is recently allowed at some trading plateform. Inshort the global economy is closely monitoring the decentralized crypto currency performance from every direction. Google has also allowed to trade in bitcoin via google pay with many options.
US corporate giant like Amazon does not accept Bitcoin payment.
Whereas, Wikipedia,microsoft, AT&T, Burger King, KFC, and subway accept Bitcoin for payment.
One can easily find out here that the companies, whose business cycle (working capital in days), is quick, are accepting Bitcoin.
Bitcoin was considered as future alternate single medium of exchange, but now it is turned into a investment portfolio product. The current value of one bitcoin is around $ USD 9,124 today.The value of bitcoin is not stable. So, apparently with its current feature, it could not be a global medium of exchange.Rather the bitcoin is the first virtual product in the commodity market.
It is said that the total supply of bit coin would be 21 million units out of which 17 million are now in circulation having worth of total USD$ 155 billion approximately. But the mining of Bitcoin is also a debatable topic, not widely accepted by financial gurus.
After the long discussion, we conclude that yes, world in looking for cash less economy and a uniform global currency, it could be either virtual or physical. In the existing crypto currencies world is divided in two blocks, one outright reject the concept, and another accept the concept
Having said all above, suggested below steps towards cash less society or crypto currency:
1.Better, two or more countries together start towards common currency and cash less society model, like it was done, in Euro, ACU $ and pegging of currencies.
2.The new currency which is agreed upon should possess the same characteristic of currency notes or plastic cards like divisible, portable,acceptable,durable and stable in value.
3.It should be a medium of exchange not a commodity for trading.
4.The minting concept of bitcoin can be linked to economic multiplier and accelerator factors. the economist can revisit the components of above factors and device country specific values for the macro economic growth.
5.Though, the plastic cards are getting outdated after cash wallets mobile applications, but still there is
a strong potential, if these are issued only in one mutually agreed currency like ripple, the existing system can gradually lead towards cash less global society.By plastic card here we mean the ATM cards or the debit cards only.
6.Its now time to revisit the function of central bank and commercial bank, one has to decide, whether
the economy really need multiple commercial bank, or one central bank would be enough for the monetary policy of any state, jurisdiction, group of countries and continent.Yes, the central bank can
better perform commercial banking of any economy and economy can save the fixed cost by uniformation of all commercial banks in one and in second stage merging of central bank with commercial operations. The recent global banking failures lead us towards many option.
7.The present global forex market is a virtual and decentralized trading model, it adds no value to existing and physical business accross the globe rather it give rise to the cost of doing business.
8.And last but not the least, there could be some global physical currency as well instead of virtual currency. The global objective is to ease down the economic activities in every corners of the world.
The sole virtual currency monitoring access to any institution could lead to monoploy.The basis of monitoring should be on macro economics fundamentals.
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